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AP® Macroeconomics

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Moderate

Loans and Excess Reserves

APMACR-A1FPLN

Suppose a bank has the following:

Assets:

  • \$150,000 Reserves
  • \$450,000 Loans

Liabilities:

  • \$600,000 Demand Deposits

If Required Reserve Ratio was 15%, then could the bank make a \$100,000 loan if a new qualified borrower applied?

A

Yes, with money to spare.

B

Yes, it has exactly enough.

C

No, it would need $100,000 more.

D

No, it would need $40,000 more.

E

No, and it would not make the loan unless the discount rate was more than the federal funds rate.